Sources in Delhi said that Dassault had been declared the lowest bidder in the race, ­making it almost certain to be awarded the deal under India’s defence procurement rules.

It means the rival bid for India’s biggest ever defence ­aircraft contract from a four-nation consortium that includes BAE Systems to supply Eurofighter Typhoons, built at its factory in Warton, Lancs, is likely to be rejected.

The decision comes despite claims by David Cameron that Britain’s continuing aid to fast-growing India would help boost trade and ­create jobs in the UK.

Tory MP Patrick Mercer said: “Overseas aid is not just something given willy-nilly. The expectation is it will generate better conditions for the ­country to which it is going and help expand trade.

“It is an awful kick in the teeth for the Indians to give this work to the French.”

Labour Shadow Defence Minister Kevan Jones said: “The defence industry is vital for the UK economy. Ministers have talked about supporting British manufacturing but so far have only disappointed.

“The Prime Minister must give the country confidence he is doing all he can to support this deal and others, which are in the national interest. If he is serious about jobs and growth, this will be a priority.

“Workers at BAE plants in Lancashire, Yorkshire and across the country will be ­worried and will want to see real leadership.”

Bob Holmes, Unite union convenor at BAE Systems, in Warton, said: “They have gone with the cheaper bid but the Eurofighter has a far greater spec. It would be a massive blow if we didn’t get the contract but there is a long way to go and nothing has been signed yet. This happens a lot in business – it is part of the process. Whether we get this contract or not – it will not impact on job cuts as these were already factored.”

President Sarkozy insisted the contract was a done deal.

But BAE Systems claimed yesterday’s announcement did not amount to a final decision.

A statement said the Eurofighter Typhoon was the world’s most modern medium multi-role combat aircraft available. It added: “We believe Eurofighter Typhoon offers the best military, industrial and economic solution for India.”

Tory MP Mark Menzies, whose Fylde constituency includes the Warton plant, said: “Now is not the time to give up. I’m told the deal is not signed and sealed by any means and I believe it is time for all concerned to ­redouble their efforts.”

Aviation expert Howard Wheeldon, of BGC Partners, said: “This is not the end of the road by any stretch of the ­imagination. The Typhoon, unlike the Rafale, is far from being a mature aircraft. The Typhoon has time on its side – the Rafale does not.”